The jury that awarded a massive $1.05 billion in damages to Apple used flawed damages theories for half the products that were found to infringe Apple's trademarks and patents, a judge ruled today (PDF).

The ruling by US District Judge Lucy Koh removes some of the sting from the giant verdict, which would have been the largest patent verdict in history if it had stood. Of the 28 infringing products, Koh has ordered a new damages trial to be held on 14 of them "[b]ecause the Court has identified an impermissible legal theory on which the jury based its award and cannot reasonably calculate the amount of excess."

The jury's damage findings on 14 other products holds. The damages total for those products is $599 million. Koh has asked for the new damages trial to take place after the whole case goes up on appeal to the US Court of Appeals for the Federal Circuit, the nation's top patent court. Koh will also add supplemental damages to the verdict to account for sales of infringing products that took place after the verdict was issued; this, too, will wait for the appeal to finish.

Today's ruling is a dramatic one, but not unexpected. While the jury issued an overwhelming ruling in Apple's favor, Koh's post-trial orders have all favored Samsung. She has already denied Apple an injunction and refused to grant the increase in damages that Apple desired.

Judge defies Apple, “reverse-engineers” on the verdict

With this order, Judge Koh has done exactly what Apple's lawyers told her she should not—in fact, could not—do. That is, she's taking a close line-by-line look at each part of the jury's award and deciding whether individual parts of the verdict should stand or fall.

"It's inappropriate to look at each one of these separate products and test whether it was correct," warned Apple lawyer Harold McElhinny at a December hearing. "This reverse engineering exercise is dangerous and contrary to the law."

Koh apparently didn't care for that viewpoint. The jury's verdict form, when it first became public, seemed a confusing mishmash; it was clear that the jurors had wanted to "send a message," as it were, but the damage figures didn't seem to align directly with any particular Apple request. Through a bit of math, though, Koh and her clerks were able to find clear patterns in the jury's awards, and have laid them out in a chart beginning on page 9 of her order (PDF).

Essentially, the jury awarded 40 percent of Samsung's profits for most of the infringing products. For five phones—the Fascinate, Galaxy S 4G, Galaxy S II Showcase, Mesmerize, and Vibrant—jurors tacked on 100 percent of what Apple claimed was its "lost profits" on those products. Then, for several products, jurors offered relatively low damage awards, giving Apple one-half of the "reasonable royalties" it asked for and none of Samsung's profits. The percentages were all based off figures offered by Apple's expert, Terry Musika.

Koh didn't find a legal problem with the jury offering awards based on Apple's "lost profits." But she did find that it was inappropriate for the jury to award infringer's profits (that is, Samsung's profits).

After figuring out just what it is the jury did, Koh then considered Samsung's arguments about whether the figures were supported by the evidence. She finds the jury's awards were justified for lost profits. However, Koh found that awarding 40 percent of Samsung's profits shouldn't be allowed for phones that were only found to infringe utility patents, and not design patents. That wiped out the $57.9 million damage award for the Galaxy Prevail.

Koh also sided with Samsung in finding that it didn't have very early "notice dates" for most of the patents. She found Samsung was on notice of the '381 patent since August of 2010 and of other patents only when they were used in the lawsuit. And in situations where Samsung had notice only of utility patents, the type of damages available should be lost profits or a reasonable royalty—not the punishment that the jury actually meted out, which was taking a chunk of Samsung's own profits.

The blame for the need of an additional trial was laid squarely at Apple's feet.

"[I]t was Apple’s strategic decision to submit an expert report using an aggressive notice date for all of the patents," remarked Koh in her order. "The need for a new trial could have been avoided had Apple chosen a more circumspect strategy or provided more evidence to allow the jury or the Court to determine the appropriate award for a shorter notice period."

A meeker “slap on the wrist”

This isn't the direction Apple wanted things to go, obviously. At a key post-trial hearing in December, Apple called the billion-dollar verdict a "slap on the wrist." The company suggested that without an injunction and more damages, the litigation would drag on and on, and that's what might happen now.

Politically, lessening the power of the original record-setting verdict makes for a less eyeball-popping headline for Apple. It could increase the chance of Koh's orders standing up on appeal. The Federal Circuit is already in the position of considering an extremely high-profile case; today's order means it won't be asked to stand by the largest patent verdict of all time as well. The smaller award could quell some of the grumbling over Apple's patent aggression, a position which has always been controversial.

Even with a smaller verdict, Apple has made its point. It has likely managed to damage a competitor more with the San Jose courtroom brawl than any other of the worldwide legal proceedings in which it has engaged. The proceedings in Judge Koh's courtroom have still become the centerpiece of the "thermonuclear war" that Steve Jobs promised to rain down on Android, which he considered a copied product.

It's ultimately up to Apple how far to push this dispute, however, and Jobs is no longer at the helm. A Reuters report published earlier this month quotes sources inside Apple saying that Jobs' successor Tim Cook was actually opposed to suing Samsung in the first place. Cook hasn't shut down the war yet, but if results for Apple continue to seem middling and tepid, his dedication to this conflict will be tested.

111 Reader Comments

b]ecause the Court has identified an impermissible legal theory on which the jury based its award, and cannot reasonably calculate the amount of excess.

Translation: All those post-trial articles where jurors claimed they wanted to increase the damages as much as possible to "punish Samsung," instead of doing what they were told by the court - calculate damages based on actual losses by Apple - must have been true.

[after playing out all possible outcomes for Global Thermonuclear War] Joshua: Greetings, Professor Falken. Stephen Falken: Hello, Joshua. Joshua: A strange game. The only winning move is not to play. How about a nice game of chess?

How can Apple lose? Don't they holds patents on methods for winning patent infringement trials, such as "having a good legal team", "clearly stating your case" and "appealing to jurors' predispositions to find for homegrown companies."

She didn't allow Samsung to show perhaps the most important evidence in their defense, and is supposed to be biased in favor of Apple.

At first I remember reading complaints that being Korean-American would lead her to be biased towards Samsung. Then she didn't allow Samsung's lawyers to submit evidence after the deadline for doing so - after something like a year-long window to do so - and everyone else said she was blatantly pro-Apple. She just can't win!

The United States is the only nation in the world which allows patent plaintiffs to request a trial by jury (which is otherwise reserved for criminal rather than civil cases), and there are many good reasons why these cases should not be tried before juries.

The United States is the only nation in the world which allows patent plaintiffs to request a trial by jury (which is otherwise reserved for criminal rather than civil cases), and there are many good reasons why these cases should not be tried before juries.

With judges being so divided on IP law, I am glad they are using a jury.

You go to one judge, you get the maximum possible penalties (eg Thomas-Rasset) while others will tear the rightsholder a new rear passage for even trying to find out the name of the allegedly infringing IP address.

Jury trials aren't perfect, but I prefer that to a judge when it comes to IP law.

Man, judge lady, make up your mind. We've all picked sides in this battle. Why the hell can't you stop making decisions based on your experience and just pick a side, already. Sheesh. Judges these days. Makes being an anonymous opinionated person a lot harder-- now I have to work to find bias. Does that seem right to you?

"It's inappropriate to look at each one of these separate products and test whether it was correct," warned Apple lawyer Harold McElhinny at a December hearing. "This reverse engineering exercise is dangerous and contrary to the law."

The proper response from Judge Koh would have been to put on sunglasses and say "I'll be the judge of that."